Why I Love Lloyds Banking Group PLC

There is plenty to hate about the banks, but they aren’t all bad news for investors. Here are five things I love about Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US).

It is one of the best performers on the FTSE 100

Investors got burned in 2008, or rather, completely immolated, but Lloyds has been on fire for the last two years. It has risen 133% in that time, six times the growth rate of the FTSE 100, which rose 21%. Any investor brave enough to buy when Lloyds was sitting on the naughty step will have been handsomely rewarded. Recent performance continues to be strong, with a 44% rise in the last six months. There could be more to come.

You can’t ignore the banks

The big banks are easier to hate than love, but they’re impossible to ignore. They were considered too big to fail in the heat of the financial crisis, and they’re too big not to succeed now the recovery is here. The banks have survived everything the regulator has thrown at them. Lloyds has slashed its impairment charges and plumped up its financial cushion, with a Core tier 1 capital ratio of 13.7%, up from 12% at the start of the year. Regulatory demands may get tougher still, but the banks can handle it.

Its customers are happier than most

Most customers have a hate/hate relationship with their bank these days. This was confirmed by new research from consumer champion Which? that scored the big high-street banks embarrassingly low for customer satisfaction. Rivals Barclays, Halifax/Bank of Scotland, NatWest/RBS and Santander have the least satisfied customers, all scoring below average marks. Lloyds did markedly better. It was just one of two banks to get average marks, along with HSBC. That’s hardly lavish praise, but given rampant consumer cynicism, it could be worse. Happy customers should be a little more loyal.

Its results are beating expectations

Lloyds posted group underlying profit of £2.9 billion in the half-year to 30 June 2013, up from £1.04 billion during the same period in 2012. It made a statutory profit before tax of £2.13 billion, against last year’s £456 million loss. It also cut its costs by 6% to £4.74 billion and declared a 43% reduction in bad debt charges to £1.81 billion. The darkest days are over. The future looks brighter.

A Government sell-off is nothing to fear

The prospect of the government flogging off its stake in the bank has weighed heavily on the share price. Too heavily, I suspect, looking at the bumper success of the Royal Mail privatisation. It actually may work in favour of Lloyds, by whipping up interest in the stock, especially if the shares are oversubscribed. The share price will get another fillip when the dividend is finally restored, which may happen at some point in the next 12 months. If you’re prepared to commit yourself for the long-term, now could be a good time to renew your affair with Lloyds Banking Group.

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> Harvey doesn’t hold shares in any company mentioned in this article.